Q2 2023 Evotec SE Earnings Call

Ladies and gentlemen, thank you for standing by welcome and thank you for joining D. E. F. He out here report 2023 throughout today's recorded presentation, all participants will.

Operator 2: Ladies and gentlemen, thank you for standing by. Welcome, and thank you for joining the Evotec SE Half-Year Report 2023. Throughout today's recorded presentation, all participants will be in a listen-only mode. The presentation will be followed by a question and answer session. If you would like to ask a question, you may press star followed by one on your touch-tone telephone. Please press the star key followed by zero for operator assistance. I would now like to turn the conference over to Dr. Werner Lanthaler, CEO. Please go ahead.

Listen only mode.

The presentation will be followed by a question and answer session. If he would like to ask a question you May press star followed by one on your Touchstone telephone.

Please press the star key followed by zero for operator assistance.

I'd now like to turn the conference call victory Doctor if they have one tablet.

Pallet CEO . Please go ahead.

Werner Lanthaler: Thank you very much. Welcome to all of you. Welcome to our H1 presentation, H1 2023. Emerging stronger, that's the theme that we have given this presentation, which will become very clear throughout presentation why we choose this topic. We have uploaded a presentation and invite you to follow this presentation throughout this presentation, which I will give together with my management team, who is here with me. Here is Laetitia, our CFO. Here is Cord, our CSO. Here is our Chief Business Officer, Matthias, and we have to apologize, Craig, this time, who is on a customer visit. I am very happy to have my whole team around here because you see that all efforts coming together at Evotec are efforts of teams. We are strong as a team. We go through crisis as a team, and we emerge stronger as teams.

Thank you very much.

Welcome to all of you.

Welcome to our Husky presentation first half of 'twenty three.

Emerging stronger.

The themes that we have given this presentation.

Which will become very clear throughout the presentation why we chose this topic.

We have uploaded a presentation and invite you to follow this presentation throughout this presentation, which I will give together with my management team who is here with me.

Here is the teacher.

CFO . He is caught us he is oh, he is our chief business Officer, Mathias and we have to apologize correct. This time quite use all the customer visit.

I'm very happy to have my whole team around here because you see that all if thats coming together you would take all of the teams.

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We are strong as a team we go through crisis as a team and we emerged strongest teams.

Werner Lanthaler: If you go to page number five of your presentation, let me directly bring you into the highlights and also some of the lowlights of H1 of 2023. You see that in a year where Q2 was heavily incidented by the cyberattack, we nevertheless grew by more than 14% in 2023. There are not many companies who can talk about double-digit growth in general, and definitely there are not many companies who can talk about 30% growth, which we show in Q1 of 2023. This is of course, all driven by fantastic collaborations that we have closed in 2022, but also at the beginning of 2023 that are now running forward. Let me mention a few of them. Our collaboration with Janssen, our collaboration with BMS expanded and extended in neurodegeneration, and of course, a strong progress of our ongoing protein degradation partnership with BMS.

And if you go to page number five of your presentation.

Let me directly bring you.

Into the highlights and also some of the low lights off the first half of 'twenty three.

You see.

That in a year, where Q2 was carefully.

Incidents at by the cyber attack, we nevertheless grew by more than 14% in 'twenty Sweet yeah, not many companies, who can talk about double digit growth.

In general and definitely not many companies, who can talk about 30% growth, which we show in Q1 of 'twenty three.

This is of course all driven.

That's fantastic collaborations that we have closed in 2022 but also at the beginning of 'twenty three that are now running forward.

Let me mention a few of them Oh, great collaboration with Johnson <unk>.

Our collaboration with B M S expanded and extended in neuro degeneration and of course, our strong progress of our ongoing protein degradation partnership M. S.

Werner Lanthaler: You will see later in this presentation the continued validation of Just – Evotec Biologics and multiple agreements that we have signed that have carried over from 2022 and are enlarged and expanded in 2023. You see highlights are coming together from many fronts, but also let me highlight that our pipeline building efforts will gain traction visibility in the next couple of months. You have seen a first highlight here with, for example, a transition in a highly attractive indication in kidney disease together with Bayer. Of course, you've heard about our lowlight of the year already enough, let me skip this and go forward into the future because that's what's all about.

And and you will see later in this presentation. The continued validation of just EBIT biologics and multiple agreements that we have signed it has carried over from 'twenty to 'twenty, two and are in large and expanded in 2023.

So you see highlights are coming together from many fronts, but also let me highlight that our pipeline building efforts will gain traction visibility in the next couple of months and you have seen the first highlight here with for example, a transition to highly attractive indication in kidney disease together with Vale.

Of course, you've heard about our low light of the year already enough. So let me skip this and go forward into the future because that's what it's all about.

Werner Lanthaler: When we talk about future on Action Plan 2025, which you see illustrated on the next page, you should be aware that we have our guideline, we follow our guideline, and it is a wonderful orientation for us, despite that sometimes there are external challenges that we have to master and that we are mastering every time when there is one and where we are every time emerging stronger. That's why we are very happy that also today we can feed back to you that we feel that we're on a very good track on Action Plan 2025. Action Plan 2025 is not only growing a fantastic shared R&D platform, which we describe as the shared economy for research and development in our industry, but it's also growing and building a massive royalty pool.

When you talk about future an extra 10, 2025, which you see illustrated on the next page.

You should be aware that we have for our guideline be follow our guideline and it is a wonderful orientation for us despite.

But sometimes the external challenges that we have to master and that we are mastering every time when there is one and where we are every time emerging stronger.

So that's why we are very happy that also today, we can feed back to you that we feel that we're in a very good strike an extra planes 2025.

It's 10 2025 years, not only growing a fantastic she had orange deep.

Let's talk.

Which we describe as the shared economy for research and development in our industry.

But it's also growing and building a massive royalty pool. So if you go to page number 28.

Werner Lanthaler: If you go to page seven of your presentation, sorry about that, you see that we have grown our co-owned pipeline assets to more than 140, which used to be still below 130 at the beginning of this year. We have grown up to 19 clinical assets that we co-own, which was 18 at the beginning of the year. You have seen that our portfolio is coming together with very balanced programs in all disease areas, and you should appreciate that there's more than EUR 15 billion of potential partnership milestones in the company that we have accumulated and which will drive our milestones and profitability into the next years to come. Don't forget, a royalty pool consists of royalties that once these products are registered, will come to us. Here, on average, we have between 8% and 10% royalties on all the co-owned assets.

Page seven of your presentation, sorry about that you see.

That we have grown our co on pipeline assets to more than 140.

It used to be still below a 130 at the beginning of this year, we have grown up to 19 clinical assets that we co own which was 18 at the beginning of the year you have seen that our.

Portfolio is coming together with very balanced programs in all disease areas and you should appreciate that does more than 15 billion of potential partnership milestones in the company that we have accumulated and which will drive our milestones and profitability into the next year.

To come.

In terms of forget a royalty pool consists of varieties that once these products are registered will come to us in here on the average we have between eight and 10% royalties on all the co owned assets.

Werner Lanthaler: This is just to start our royalty pool and to illustrate that with many aspects that we're doing, we are just at the beginning and when it comes to the beginning, I'm also very happy that Laetitia, who started recently in the company, is for now giving you the first time Q2 presentations in a full setting that she has prepared. With this, I hand over to Laetitia.

This is just to start.

Our royalty pool and to illustrate that with many aspects that we're doing we're just at the beginning and when it comes to the beginning I'm also very happy that the teacher, who started recently and the company is now giving you. The first time, a Q1 Q2 presentations in our food setting that she has.

With this I hand over to Richard.

Laetitia Rouxel: Thank you, Werner. It's my pleasure to walk you through H1 financials and the guidance for 2023, which we, as you all know, updated on 27 July 2023. We had a very strong start to the year with revenues in Q1 at EUR 213.6 million, which implies a growth of 30% versus Q1 of the prior year. A robust underlying base business, as well as a new strategic collaboration with Janssen and the expanded collaboration with BMS have contributed to this excellent performance. The cyber incident in the first week of Q2 led to a deliberate shutdown, however, deemed necessary to protect all the company's partners and stakeholders at Evotec, could ensure that integrity of scientific data remained unaffected. This led to missed revenue of around EUR 100 million, of which EUR 30 million were compensated with higher than anticipated and advanced payment.

Thank you Vanessa it's my pleasure to walk you through how your financials and the guidance for 2023, which we as you all know update you don't print seven subsidized.

We had a very strong start to the year with revenues in Q1 at 236 million, which supplies or growth of 30% versus Q1 of the prior year.

Our robust underlying base business, that's what it is a new strategic collaboration with young send and expanded collaboration with BMS has contributed to this excellent performance.

The cyber incident in the first week of Q2 need toward the NIPA Richard down however, deemed necessary to protect all the company's path nurse and stakeholders at igo uptake.

Ensure that integrity upside empty seats that are remain unaffected.

Which leads to mis revenue of around 100 million of which sets the media and the web cocoa safety for but with higher than anticipated and advance payments.

Despite this massive event it will take a question your tweaks pad, you're still professional activities and enter a new partnership. Please I liked the new nuclear tick partnership between just people take biology and Sandoz.

Laetitia Rouxel: Despite this massive event, Evotec continued to expand its operational activities and enter a new partnership with highlight the new multi-year tech partnership between Just – Evotec Biologics and Sandoz. All this contributed to group revenue amount to EUR 383.8 million in H1 2023, increased by 14% compared to previous H1 in 2022, amounted to EUR 336.9 million. Moving to page 10. Gross revenue grew by 14%, plus EUR 46.9 million to achieve EUR 383.8 million within H1, of which about EUR 214 million were generated in Q1, and EUR 170 million in Q2 2023. Growth of the base business was also 14%. We achieved milestone upfront and licenses revenues of EUR 4.3 million, versus EUR 6.8 million the year before. Just – Evotec Biologics more than doubled its revenue share year-over-year to EUR 59 million during H1.

All of these contributed to group revenue amounted to 383, but it to me again in Q1 2023 increased by 14% compared to previous house here in 2022 amounted to 306 9 million.

Yeah.

Moving to page 10.

Christian you blew by 14% plus $46 9 million to achieve $383 eight within the first six months of which about 214 million were generated in Q1, and then one other than me get one other than 17 million in the second quarter of 2002.

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Gross of the base business was also 14%, we achieved milestone upfront and license revenues of $4 3 million versus.

Purchased $6 8 million the year before.

Just even take biologics more than double its revenue share year over year to 15 9 million during the six months the six first half months of the year.

The cost of revenue during the six months ended <unk> of June amounted to $284 3 million.

Laetitia Rouxel: The cost of revenue during the six months ended 30 June amounted to EUR 284.3 million, yielding a gross margin of 25.9%. The significant increase of margin was attributable to recent signed beneficial cooperation and partnership with BMS, Sandoz and the milestone revenue of EUR 2 million from Bayer. Excluding Just – Evotec Biologics, total gross margin amount to EUR 25.3 million, versus 27.3% during the same period last year. The cost of revenues of the group was divided into EUR 160.3 million in Q1, gross margin 24.9%, versus EUR 124 million in Q2, gross margin of 27.2%.

Do you think the gross margin of 25, 9%. The significant reserve margin was attributable to recent signed beneficial Corporation in partnership with a B M. S Sandoz and the milestone revenue of 2 million from buyer.

Excluding just give or take by your cheeks total gross margin amounts to 25 three.

Yeah.

This was 27.

3% during the same period last year.

The cost of revenues of the group was divided into one other than $60 3 million in Q1 gross margin of 24, 9%. There first one other than 24 million in Q2.

Gross margin of 27, 2%.

The decrease in unpopular with R&D expenses by 11% to 29 million in their first 33 Bucks with the prior year and partnered R&D expenses by 64% to one 9 million versus $3 5 million the year before.

Laetitia Rouxel: The decrease in unpartnered R&D expenses by 11% to EUR 29 million, versus EUR 33.3 million the prior year, and partnered R&D expenses by 64% to EUR 1.9 million versus EUR 3.5 million the year before, was primarily related to the impacted business activity in Q2 and in the second quarter leading to a temporary reduction of R&D cost in Q2 2023 to EUR 12.2 million after EUR 18.7 million in Q1. Our adjusted group EBITDA of H1 totaled at EUR 26.1 million, which compares to EUR 33.6 million the prior year. The decrease was caused by missed revenues, as well as higher cost to manage adverse effects of the incident. Business dynamics were fully intact until 6 April, resulting in a strong start to the year, yielding an EBITDA of EUR 34.3 million in Q1. One-off burdens due to the incident in Q2 were partially mitigated due to the signing of the technology partnership with Sandoz.

West primarily related to the impact of business activity.

In Q2 and in the second quarter, leading to a temporary reduction of R&D crest in Q2 2023.

To 12 2 million after 18 7 million in Q1.

Our adjusted group EBITDA of the first six months totaled at 26, 1 million, which slippers to 33 board seats to prior year.

The decrease west coast by missed revenues as well as higher of course to manage adverse effects.

Incidents.

Business that Nymex were fully intact until six survey period, resulting in a strong start to the year, yielding an EBITDA of $34 3 million in Q1.

One off burden to the incident in Q2 were partially mitigated due to the signing of the technology partnership with Sandoz.

Laetitia Rouxel: Still, adjusted EBITDA Q2 was in a negative territory of EUR 8.2 million in Q2. Moving to page 11, summarizing a selected balance sheet and cash flow items for Evotec. With an equity ratio of 51% compared to 52.6% as of December 2022, we remain with a very solid basis for future investments as it provides us with considerable financing flexibility. Cash flow used in operating activities in H1 amounted to EUR -5.6 million. The comparable figure last year was a cash flow of EUR 240 million and was largely driven by a EUR 200 million upfront payment from BMS in H1 2023. This figure is impacted by the cyber incident and does not yet reflect payments in connection with the BMS collaboration and the agreement with Sandoz, which were received in July after Q2 end.

Adjusted EBITDA Q2 wasn't then they get used to a retiree of $8 2 million in Q2.

Moving to page 11.

Summarizing our selected balance sheet and cash flow items for Eva take with.

With an equity ratio of 51% compared to 52 six as of December 2022, we remain with a very solid base for future investments.

Keith I think provides us with coke cheaper at bolt financing flexibility.

Cash flow used in operating activities in the first six months amounted to minus $5 6 million for the comparable figure last year was a cash flow of 240 million and was largely driven by your 200 million.

Payment from BMS in each one 2023.

This figure is impacted by the separate incidents and does not yet reflect payments in connection with the BMS collaboration and the agreement with Sandoz, which were received in July after Q2.

The net debt leverage ratio amounted to minus <unk> nine times, adjusted EBITDA, which mean, we still maintain a net cash position.

Laetitia Rouxel: The net debt leverage ratio amounted to -0.9 times of adjusted EBITDA, which mean we still maintain a net cash position. The group liquidity, as per end of June, amounted to EUR 620.8 million. We continue to invest significantly into the growth of our sites and our offering into J.POD facilities in Toulouse in H1. This is reflected in CapEx, which amounts to EUR 104 million in H1. In addition, we finance our equity and minority shareholding with EUR 9.2 million. Moving page 12. As presented in our business update end of July, based on our regular review of our economic situation and our order book status, our guidance was adjusted with revenue now expected to come in a range of EUR 750 to 790 million. Unpartnered R&D expenses to reach EUR 60 to 70 million, and adjusted EBITDA in a range of EUR 60 to 80 million for the full year.

The group Leaky equally key asper end of June amounted to 628th need yet.

We'll continue to invest significantly into the growth of our sites.

And our offering into chipboard facilities into lose in the first semester.

Okay.

This is reflected in capex, which amounts to one other than for median in each one. In addition, we finance our equity and minority shareholding, we've not gone to media.

Moving to page 12.

As presented in our business update end of July based on our regular review of the economic situation and our order book stages. All guidance was adjusted with revenue now expected to come in a range of 750 719 million.

Net R&D expense seized to reach 60 to 70 million and adjusted EBITDA in a range of $60 million to $80 million for the full year.

Okay.

Laetitia Rouxel: Slide 13 shows the bridge amount between the original guidance and the revised one. We estimate revenues net of EUR 770 million missed in Q2 due to the cyberattack. Are seeing buyer's dynamic in more service-oriented business. Overall, we think we will be able to catch up and generate additional revenue of EUR 20 to 40 million in Q3 and Q4. Earlier and better than anticipated, effects from advanced payments are mitigating part of the negative effects. With Slide 14, I would like to introduce to you our initiative to bounce back ever better after Q2. With the so-called value protection plan, which includes a variety of activities, we aim to secure liquidity and profitability. The identified savings potential for 2023 is representing EUR 25 million. Furthermore, we continue to improve processes and systems as well as improve GMP compliance, good manufacturing practice.

Slide 13 shows the breach.

Between the original guidance and the revised one we estimate revenues net of 770 million missed in Q2 due to the cyber attack.

Yes.

We see the sensible partnering pipeline is true, but are seeing buyers dynamic and more service oriented business overall.

We think we'll be able to catch ups and generate additional revenue of 20 242 million in Q3 and Q4.

Third year and better than anticipated effects from advanced payments are mitigating most of the negative effects.

We slide 14, I would like to introduce to you our initiatives to bounce back ever better after Q2 with a so called value protection plan, which includes a variety of activities, we aim to secure liquidity and profitability.

Do you still keep quite siblings potential for 2023 is 20 Fives me, he's representing 25 meters.

So theres no we continue to improve processes and systems as well as improve GMP compliance. Good manufacturing practice, we are preparing for focus E. F. T build out in the UK and for the chip put site into loose in Europe .

Laetitia Rouxel: We are preparing for a focused ERP build-out in the UK and for the J.POD site in Toulouse in Europe. A strategic review has been started which targets a portfolio realignment, including capabilities and capacities. Finally, we will continue to invest in focus areas for technology leadership. Moving page 15, we estimate the net impact of one-off costs to rebuild the business together with missed revenues of EUR 80 to 85 million. As mentioned before, with the value protection plan, we aim to be the leaner and safer organization targeting EUR 25 million in cost savings. This will also result in recurring savings in 2024 and beyond. The new strategy collaboration with Janssen and Sandoz, as well as the expanded collaboration with BMS, contributes significantly and help to mitigate the missed revenue and profitability resulting from the cyber, so that we updated adjusted EBITDA guidance to EUR 60 to 80 million.

Yeah.

Our strategic review has been stocking, which still gets a portfolio realignment, including capabilities and capacities. Finally, we continued to invest in focused areas for technology leadership.

Moving to page 15, we estimate the net impact of one off cost to build the business together with nice revenues of 80 to 85 million.

As mentioned before was the value protection plan, we aim to build a burner and say neither a saurian safer organization.

Targeting 25 million in cost savings.

This will also result in because recurring savings in 2024 and beyond.

The new strategic collaboration with Johnson, and Sandoz as well as the expanded collaboration with BMS quickly with significantly and help to mitigate the nice revenue and profitability, resulting from the cyber. So that we update you did just to give you guidance to 62 eight you need yet.

With this I hand over back to you down there.

Laetitia Rouxel: With this, I hand over back to you, Werner.

Werner Lanthaler: Thank you very much, Leticia. We are building the shared research and development economy in our industry. It is essential to also build leading platforms in this industry to drive progress. We pride ourselves not only to have the most cost-efficient and cost-effective platforms, these are also the most innovative platforms at this stage available in our industry. Let me name them. It's PanOmics, so omics-driven discovery and drug development. It's iPSCs in cell therapies, so using induced pluripotent stem cells for off-the-shelf solutions. It's Just – Evotec Biologics. We bring this all together in an end-to-end shared R&D platform, which is accessible for more than 800 partners in our industry. Here are just a few examples of what we can do when we are applying this.

Thank you very much for Tcf.

We are building.

She had research and development economy in our industry.

With this is is essential to also build leading platforms.

In this industry to drive progress.

So we pride ourselves not only to have the most cost efficient.

Cost effective platforms. These are also the most innovative platforms at this stage available in our industry.

Let me named it.

It's Pamela mix, so all mixed driven discovery and drug development.

Its IPO season cell therapy cell therapies, so using induced pluripotent stem cells for off the shelf solutions.

And it's just you will take biologics.

And we bring this all together in an end to end shared R&D platform, which is accessible for more than 800 partners in our industry.

He had just a few examples of what we can do when do we are applying this so page 17 illustrates to you. How we are building this massive royalty pool with our partners by fully leveraging these technologies.

Werner Lanthaler: Page 17 illustrates to you how we are building this massive royalty pool with our partners by fully leveraging these technologies. Going strong with Bristol, going strong with Janssen, going into a tech partnership with Sandoz, and also building with iPSCs a cure for diabetes together with Sanofi is just highlighting the potential of these platforms in all four areas. If you go one page forward, you see how every building block is bringing this into a portfolio in several disease areas where we're very strong and along the full value chain from clinical projects to a massive iceberg of preclinical and discovery projects that is growing over time. Yes, this is the long game that so many people have asked us to build. Yes, this is the idea of going into the same direction with a very clear strategy to build these co-owned assets.

Going strong with Bristol's going strong with young son.

Going into a tech partnership with Sandal and also building with IP sees a cure for diabetes together with Salobo. It's just highlighting the potential of these platforms in all four areas.

And if you go one page four but you see.

Every building block is bringing this into our portfolio.

In several disease areas, we have a very strong.

And along the full value chain from clinical projects to a massive iceberg of.

Of preclinical and discovery project that is growing over time.

So yes. This is the long game.

So many people have asked us to build and yes. This is the idea of going into the same direction with a very clear strategy to build these co owned assets and yes. If you go to the next page you see that this comes with a massive.

Werner Lanthaler: Yes, if you go to the next page, you see that this comes with a massive cascade of milestones where we are just starting to collect and to come to the data points of the milestone cascade, which already exists. Behind Action Plan 2025 and into the future, you see illustrated here into the year 2040 that we have already built a massive pool of opportunities, which biology will now decide of how much we can collect of these more than 15 billion that are visible here. Now going to the next page, let me step back here for a second because it comes to Just – Evotec Biologics. I'm very often thinking back to our capital markets day, which we held in November in Seattle last year, where the key question was, will you ever find partners for this platform?

Cascade of milestones, where we are just starting to collect and to come to the data points of the milestone cascade, which already exists.

So behind action plan 2025 and into the future you see illustrated here into the year 2014.

That we have already built a massive pool of opportunities, which biology will now decide of how much. We can collect of these more than 15 billion that are visible here.

Now going to the next page and let me step back you report second.

Because it comes to just eat will take biologics.

And.

I'm very often thinking back to our capital market State, which we held in November in Seattle last year.

Where the key question was so will you ever.

Find partners for these platform.

Werner Lanthaler: Where we were just starting to create a sales order book, which was stretching itself to go to the $100 million sales. Now, only a few months later, we are approaching $1 billion of committed sales into Just – Evotec Biologics. This is why I really think we are witnessing an iPhone moment in this industry when it comes to fully continuous manufacturing for biologics. Higher degrees of automatization and fully continuous manufacturing will bring down cost of goods, and with this, fulfill the original mission of Just – Evotec Biologics to gain access with novel products for massively more people on this planet. Watch out for Just – Evotec Biologics. This is just the beginning of a technology which will change the world, and with this, also the access to biologics.

And we will be we're just starting to create a sales order book, which was stretching.

It sells to go to the 100 million dollar sales.

Now only a few months later.

We are approaching it billion of committed sales into just you will take biologics.

And this is why I really think we are witnessing an iPhone moment in this industry when it comes to fully continuous manufacturing for biologics.

Because higher degrees of optimization and fully containers manufacturing will bring down.

Cost of goods and with this full suite D or Richard Mission of Trust, you will take biologics to gain access with novel products for massively more people on this planet.

So watch out for trustee protect biologics. This is just the beginning.

If a technology, which will change the world and with this also the access to biologics.

Werner Lanthaler: That's why we are preparing what you see on page 21 for a capacity build, which is not driven by the thought of more capacity, but which is driven by the thought of a paradigm shift of technology to really allow novel technology to build better biologics. We are so happy that this paradigm shift is happening and is validated by the strongest and best partners that you can find in industry, for example, with Sandoz, but also in public governments or in public institutions, like with the Department of Defense in the United States.

And that's why we are preparing what you see on page 21.

For a capacity built.

Which is not driven by just sort of more capacity, but which is driven by the sort of a paradigm shift of technology.

To really allow novel technology to build better biologics and we are so happy that this paradigm shift is happening and is validated.

By the strongest and best partners that you can find in the industry. For example, the sandal, but also in public governments or in public institutions like with the department of defense in the United States and again. This is just the beginning of what we will do in the U S and increasing in Europe , where trade pops to use.

Werner Lanthaler: Again, this is just the beginning of what we will do in the US and increasing in Europe, where J-POD2 is in full swing very soon because we are keeping our timelines in building our J-POD in Toulouse, where we have just installed recently our PODs to also then establish manufacturing processes here. I couldn't be more excited about Just – Evotec Biologics as I am right now. Having said that, I also couldn't be more excited about PanOmics, about iPSC cell therapies, and about our R&D end-to-end platform. When it comes to our next chapter on this presentation, let me please guide you to page 23. It is so important for us not only to build a company, but it is important for us to contribute with our company to the planet.

In food swing very soon because we are keeping our timelines in building our cheap put into lose where we have just installed recently our part to also then establish manufacturing processes here.

I couldn't be more excited about trustee would take politics as I am right now having said that I also couldn't be more excited about pandemics about IPO T cell therapies and about our R&D into platform.

When it comes to our next chapter on this presentation. Let me. Please guide you to page 23.

Because it is so important for us not only to build.

A company, but it is important for us to contribute with a company to the planet.

Werner Lanthaler: With this, we are keeping our promise when it comes to our contribution to the environment, our contribution to social welfare and social wellbeing on this planet, and when it comes to our contribution to better governance. With this, we are showing you our goals of 2023, and are happy to report back that all goals of 2023 will be operationally executed as planned. If you go to page 24, let me, when it comes to operational execution, also tell you one more time that we will increase our pace in the H2 after a stop, which we had to take to protect data and our partners.

And with this we are keeping our promise when it comes to our contribution to the environment, our contribution to social dose and social well being on this planet and when it comes to our contribution to better governance.

With this we are.

Boeing you our goals of 23 and are happy to report back that all goes of 'twenty three will be operationally executed as planned.

If you go to page 24.

Let me when it comes to operational execution also tell you one more time that we will increase our pace in the second half after a.

Stopped which we had to take to protect data and our partners.

Werner Lanthaler: With this, I think we are really just at the beginning for the start of a very strong H2 where you will see Omics, iPSCs, Just – Evotec Biologics, and our end-to-end shared R&D platform deliver to contribute into a growth of 2024, where we still think that despite a softer funding environment, our market offering is intact. Also, let me highlight on page 25, sorry, that you will see several pipeline projects emerging from this pipeline into visibility by transitioning from one phase to the next. This is where we go from phase III projects, for example, in Asia, to very exciting preclinical projects going into the clinic with our partners.

And with this I think we are really just at the beginning for the start of a very strong second half where you will see all makes I puc's trustee protect biologics and are into inkjet R&D platform deliver to contribute into a growth of 24, where we still think that despite his.

Solve the funding environment, our market offering is intact.

And also let me highlight on page 20.

Six.

Cisco 25, sorry debt.

That you will see several pipeline projects.

Emerging from this pipeline into visibility by transitioning from one phase to the next.

And this is where we go from phase III projects for example in Asia, two very exciting preclinical project going into the clinic with our partners.

Werner Lanthaler: At this point in time, let me thank you that you are following Evotec and that you are ready to also understand what we are doing and also translate this into your environments. We are very happy to discuss and to make our story more visible to even more of you, and that's why you will see us at several conferences in H2 2023, which we have illustrated here on page 26 for you. Would be great to see you there, or otherwise, please be invited to our second Capital Markets Day, which will hold on the 15 November. With this for H1, let me summarize.

And at this point in time, let me. Thank you that you are following Evo Tech and that you are.

Ready to also understand what we are doing and also translate this into your environments and we are very happy to discuss and to make our story more visible to even more of you and that's why you will see us at several conferences in the second half of 'twenty three.

<unk>, which we have illustrated here on page 26 for you and would be great to see you there or otherwise please be invited to a second capital markets day, which will hold on the 15th of November .

With this four H, one let me summarize.

Werner Lanthaler: It is really a half year with two sides at this stage, a great start and an unexpected stop, but we are coming out of this stronger than ever with more energy than ever and with the most impressive technologies to bring our platforms forward together with our partners. With this, I want to thank my team, I want to thank the company for all the help that we have received, also many of our outside partners. We are looking forward to your questions.

It is really a half year with two sites at this stage a great start and an unexpected stop but we are coming out of this stronger than ever with more energy than ever and with the most impressive technologies to bring our platform forward together with our partners.

And with this I want to thank my team I want to thank the company for all the help that we have received also many of our outside partners.

And we are looking forward to your questions.

Ladies and gentlemen at this time, we will begin the question and answer session.

Operator 2: Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star followed by two. If you're using speaker equipment today, please leave the handset before making your selection. Anyone who has a question may press star followed by one at this time. The first question comes from the line of Peter Verdult with Citigroup. Please go ahead.

Anyone who wishes to ask a question May press star followed by one on their Touchtone telephone.

If you wish to remove yourself from the question queue. You May press star followed by two each.

If you are using speaker equipment today, please lift the handset before making your selection.

Anyone who has a question you May press star followed by one at this time.

The first question comes from the line of Peter <unk> with Citigroup. Please go ahead.

Peter Verdult: Thank you. Pete Verdult here, Citi. Two questions. Werner, could you just talk a bit more about characterizing the funding environment that you're seeing? I think you've noted softness, Evotec will hold its own. What are you seeing in terms of large, medium, small customers and their behavior? Secondly, on Just biologics, post-Sandoz, I realize you can't go into huge detail, again, could you characterize whether you're seeing a lot more incoming and inquiries in terms of partnering with Evotec as it relates to Just biologics going forward? Thank you.

Thank you people don't have Citi two questions Brian .

Could you just talk a bit more about characterizing the funding environment that youre seeing I think you've noticed softness.

You just said well we'll.

Whole design, where countries what are what are you seeing in terms of large medium and small customers and their behavior and then secondly on just biologics.

Post Sandoz I realize you can't go into huge detail, but again could you characterize whether youre seeing a lot more incoming inquiries in terms of partnering with even take as it relates to just bottlenecks going forward. Thank you.

Werner Lanthaler: Hi, Peter. Great to hear you. On both questions, I will hand over to Matthias, who is the person who is closer to the market as our Chief Business Officer, and therefore best witnessing what he sees.

Hi, Peter Great to hear you on both questions I'll hand over to Martin who is the person who is closer to the market as our chief business Officer, and therefore, best witnessing what T C.

Matthias Evers: Thank you, Werner, and thank you, Peter. Thanks for the question. On the funding environment, this is, of course, something we watch very carefully, and we developed a certain view, which is as follows. A, we see, obviously, starting in the year with Silicon Valley Bank, with, I think, interest rates. I don't need to tell you that the biotech environment is stiffer and that we have a certain more limited funding environment. At the other end, you have an outsourcing partnering market, which is large in nature. By our count, at least EUR 20 billion with a conservative measure, so not including all the latency, et cetera, that we see. By default, a large market with a long-term demand, which is clearly unbroken in terms of therapeutic areas with high unmet needs. Why do I open up both vectors?

Thank you Brenda and thank you Peter Thanks for the question so on the funding environment.

This is of course, something that we watch very carefully and we developed.

View, which is as follows.

We see obviously starting into the year was.

With Silicon Valley Bank, whereas I think interest rates I mean, I don't need to tell you that.

Biotech environment is stiffer.

And that we have.

More limited funding environment at the other end you have.

And the outsourcing partnering market, which is the auto nature also by our count at least $20 billion with a conservative measure so not including all of the adjacency et cetera.

Yeah.

So by default.

Large market with a long term demand, which is clearly on broken in terms of.

Therapeutic areas with high unmet needs and why do I open up both spectrums of short term funding challenges for small companies as well as an environment of a very large call. It also market and essentially profit pool for us because we are quite positioned with our value proposition which is against.

Matthias Evers: The short-term funding challenges for small companies, as well as an environment of a very large, call it also a market and essentially profit pool for us because we are quite positioned with a value proposition, which is against the premium end in terms of scientific problem-solving, in terms of end-to-end solution, in terms of high-end products. This market affects us a bit. We are adjusting our tactics. You have seen in the numbers as presented by Laetitia that we are adjusting our growth for the H2 by something like 7%. You see it adjusted. We are definitely looking forward into a market environment where the value proposition of Evotec is part of the solution in this environment.

The premium end in terms of scientific problem solving in terms of end to end solution in terms of.

Products. So this market effects of the pit. So we are adjusting our tactics. So we you have seen in the numbers as presented by the <unk> that we are adjusting our growth for the second half year by something like 7%.

You see it adjusted but we are definitely looking forward into a market environment, where the value proposition of it protect us cutoffs of solution in this environment, because so far talk only about the small companies and for those in our funding constrained environment.

Matthias Evers: So far I've talked only about the small companies and for those, in a funding constraint environment, accessing a highly efficient R&D platform as well as leveraging variable cost from their perspective is helpful. A similar argument I would take also for the large customers. If I draw a line, we are reasonably optimistic and comfortable with our growth outlook, while recognizing that particularly for more commoditized services and solutions, the world has become a bit tougher.

And highly efficient R&D platform as well.

Leveraging variable costs from that perspective is helpful and a similar argument I would take also for the large customers. So if I draw a line, we are reasonably optimistic and comfortable with our growth outlook, while recognizing that particularly are far more commoditized services and solutions a lot of that has to come up with Tata.

And if I may add, especially in our development and manufacturing API business, we see.

Werner Lanthaler: If I may add, especially in our development and manufacturing API business, we see, I would say, more competitive market. Otherwise, market for drug discovery, high-end quality services is very strong.

I would say more competitive market.

Otherwise market for drug discovery high in.

Quality services is very strong.

Matthias Evers: This is very fair. Secondly, the question on Sandoz. I take the same arc of the story as Werner started because, as we presented at the capital markets day, and I remember our discussions, Peter, obviously we highlighted already feasibility projects in the biosimilar space, and that gave us a certain focus. As we publish, we see the realization of a very large tech partnership with Sandoz. Now, this is part of the commercial validation next to the public partnering with the DoD. This has made quite an impact on the market. We see an early partnering pipeline with more momentum. What we feel is a priority now to properly launch and expand existing partnerships and then building into the next two years, I would say 2024, 2025, that pipeline that is following. Yes, we see increasing momentum around this technology platform.

This is very fell and then.

That leaves the question on Pandora and I would take the same arc also story as Benno starts is because as we presented at the capital markets day in our remember our discussion will be coming.

Obviously, we highlighted already feasibility projects in the Biosimilar space and that gave US a forecast and we as we publish we see the realization of a very large tech partnership with Sunbelt.

No. This is a.

Part of the commercial validation next to the public partnering with it so.

So this has made.

Quite an impact on the market. So we see an early partnering pipeline with small momentum. So what we feel is a proud to now too to properly launch and expand existing partnerships and then building into next into the next two years I would say 2020 for 2025 that pipeline better.

But yes, we see increasing momentum around this technology platform.

Matthias Evers: Thank you.

Thank you.

Werner Lanthaler: Great.

Peter Verdult: Thank you. Very clear. Thank you.

Great. Thank you very clear thank you.

Werner Lanthaler: Next question, please.

Next question please.

Operator 2: The next question comes from the line of James Quigley with Morgan Stanley. Please go ahead.

The next question comes from the line of James Quigley with Morgan Stanley . Please go ahead.

James Quigley: Hello. Thank you for taking my questions. I've got some clarification questions. In the report, I think you said there's EUR 38 million in milestones at the EVT Execute level. This seems to move up into service fees and FTE revenues at the group level. Does this fully relate to Sandoz? How much of the additional amount is Sandoz or are there other effects in there? I know you mentioned the Bayer milestone as well. When I look at the guidance, as you sort of highlighted, just got a slowdown in H2. Can you remind us of some of the headwinds in the H2 2022 base. In terms of milestones or anything that could impact the headline growth rates. What does the guidance imply for the underlying growth rates?

Hello, and thank you for taking my question.

A clarification question.

Sorry.

Paul.

My name and milestones at the EBIT level.

And it seems to me real quick service fees.

And I see your revenues.

Okay.

Okay, Sandoz, how much Avi.

Oh.

No.

Amount to Sandoz.

I know you mentioned.

Boston as well.

And when I look at the guidance.

As you sort of highlighted.

Just wanted to slow down.

Can you remind us of some of the headwinds in the second half 'twenty to your base.

The milestones or anything like that.

It could impact the growth.

Growth rates.

Does the guidance imply for your underlying growth rates.

James Quigley: Finally, on the previous call you highlighted EUR 20 to 40 million in revenues from a catch-up perspective. How do you expect to recognize between Q3 and Q4? Also, there's a lot of pushes and pulls for the H2 of the year. If you could give us an idea of the cadence of Q3 and Q4 revenues, that would be awesome. Thank you.

Finally.

On a previous call you highlighted 2014.

And revenues from a catch up perspective.

How would you expect to recognize between third and fourth quarter.

All the pushes and pulls in the second half of the year. So if you can give us an idea okay.

Fourth quarter revenues that would be that'd be awesome. Thank you.

Werner Lanthaler: Mm-hmm. On the guidance question into the H2, I'll then hand back to Laetitia. Let me first give you a color on what we have so far seen as milestones coming in. There is nothing recognized from Sandoz. That's only upfront that we have so far recognized. The milestones that are coming into the company at this stage are largely driven by the existing partnerships with BMS Onco, BMS Neuro. Here we have a very good visibility on a very big pipeline of these two partnerships to come. Bayer, as the milestone contribution, which was small but scientifically very important, is a big contributor. Then you see high FTE rates and high exposure to these partners where we are delivering on these platforms. That shows you also the very strong growth in what we show as Innovate revenues in the H1.

Mhm.

Pleasure on the.

Guidance question into the second half and then hand.

Back to the teacher, but let me first give you a color on.

On what we have so far seen as milestones coming in.

There is nothing recognized from Sandoz, that's only upfronts that we have so far recognized so the milestones that are coming into the company at this stage are largely drill.

Driven brady existing partnerships with BMS on coal.

B M S neuro and.

And here, we have a very good visibility on a very big pipeline of these two.

Partnerships to come.

They are as the milestone contribution which was small but scientific is very important is a big contributor.

And then you see high FTE rates and high exposure.

Exposure to these partners, where we are delivering on these platforms and depth chose you also the very strong growth in what we.

Show Us innovate revenues in the first half and index quite also innovate header despite.

Werner Lanthaler: That's why also EVT Innovate had, despite the cyber incident in the Q2, a very good H1. The catch-up effect and when it comes to "headwinds" of the H2, I think again, you will not see many headwinds everywhere where we are back to productivity as we wanted to have it, with the exception of our API manufacturing business. That's also where, due to the fact that we simply were not able to show when exactly we will have the platforms back, there was a kind of a gap in our business development, which will by the end of 2023, beginning of 2024, then kick in again.

Despite the cyber incident into Q2, a very good first half.

The catch up effect and when it comes to quote unquote headwinds of the second half.

Think again, you will not see many headwinds everywhere we are back to.

To profits of two two productivity as we wanted to have it with the exception of our API manufacturing business.

And that's also we are.

Due to the fact that we simply were not able to show when exactly we will have two platforms back there was a kind of a get in our business development, which will by the end of 'twenty three beginning of 'twenty. Four then kick in again, so effectively that's where the headwind from our gross comes.

Werner Lanthaler: Effectively, that's where the headwind from our growth comes, because all other areas in drug discovery are, I would say, almost back to normal and almost back how we expected them to be at an above double-digit growth for 2023. The development business is on a below double-digit growth. That's how you could titrate that out. When it comes to a better illustration of how to come to the catch-up effect of EUR 20 million to 40 million, I hand back to Laetitia.

Because all other areas in drug discovery.

I would say almost back to normal and almost back how we expected them to be at and above double digit growth.

For 2023, and the development business is on the below double digit growth.

How are you you could titrate it out.

And when it comes to a better illustration of.

How to come to the catch up effect of 20 to 40 millions I hand back to late Q2.

So thank you for your question coming back on the guidance and what.

Laetitia Rouxel: James, thank you for your question. Coming back on the guidance and on what is included as milestones and key payments we had. H1, we had BMS 3.1 that had accounted for two times EUR 11 million. Let's say around EUR 22 million, EUR 23 million in March. We got the Sandoz kicking in June 2023, so this year, for EUR 36 million. That is the two major elements that has come as a big bonus this year. That is what is factored in the guidance that we share.

What he's in coded as.

Minor storms.

He payments, we had so first half of the year, we had BMS.

Three part one that had accounted for two times 11 million. So, let's say round in 'twenty two 'twenty three median in March.

And we got the Sandoz kicking in June .

2020, threes with the sheer for 36 million. So that's the two major.

Elements that has come as a.

What you see here.

And Thats what is factored in in the guidance that we share.

And the rest would be considered as potential upfronts.

Werner Lanthaler: The rest should be considered as potential upfront and very unlikely recognized revenues from execution of projects if we deliver still by the end of this year. Otherwise, it will be recognizable profitable milestones to come. As you know, we never guide for them because they are depending on the timelines that our partners are executing. I hope that gives you a color on your question, and we are looking forward to the next question.

And very unlikely recognized revenues from execution of project, if we deliver still by the end of this year and otherwise it could be recognizable profitable milestones to come but as you know we never guide for them because they are depending on the time lines at our partners executing.

I hope that gives you a color on your question and we are looking forward to the next question.

The next question comes from the line of Michael Risking with Bank of America. Please go ahead.

Operator 2: The next question comes from the line of Michael Ryskin with Bank of America. Please go ahead.

Hi, This is wolf Chan off on for Mike. Thanks for taking the questions. So on the first one I kind of wanted to build off of an earlier question I know that you talked about activity among smaller biotech customers.

Joseph Wolf Chanoff: Hi, this is Wolf Chanoff on for Mike. Thanks for taking the questions. On the first one, I kind of wanted to build off of an earlier question. I know that you talked about activity among smaller biotech customers, but a lot of your peers have also kind of called out seeing signs of budget tightening or prolonged decision-making amongst larger pharmas. Is this something that you're seeing as well, or are your conversations with your larger pharma customers having a different conversation tone? Then I have a follow-up.

But a lot of your peers have also kind of called out seeing signs of budget tightening or prolonged decision, making amongst voucher farmers is this something that you're seeing as well or are you're.

The conversations with your larger pharma customers, having a different conversation.

And then I have a follow up yeah.

Werner Lanthaler: Yeah. Maybe I'll do the following, that we split this answer in two parts. One, that Matthias gives you a short answer on large pharmas when it comes to our end-to-end platform services. Cord, who is also on the line to describe a bit to you how with large pharma, we are making our long-term innovation deals and why this is less impacted than other things. Let's split this into parts.

Yeah, maybe.

I'll do the following that we split this answer in two parts one that Mathias gives you a short answer on that farmers when it comes to quote unquote.

In two and platform services and CT who is also on the line to describe to you how with large pharma, we are making our long term innovation deals and why this is less impacted than other things. So let's put this in two parts.

James Quigley: Okay.

James Quigley: Yeah.

James Quigley: Well, thank you for the question. Let me dig a little bit more compared with my previous answer, because I touched on the larger pharma call. Yes, to be clear, across the industry, there's some R&D budget tightening going on. I don't think we have a different view. I think what we try to address is that.

Thank you for the question.

I mean, let me dig a little bit more comparable with my previous answer because I've touched on.

On our call so just to be clear across the industry. There's some R&D project tightening going on I don't think we have a different view I think what we tried to address that.

In those situations the demand for high end inauguration is unbroken and received and many in the selective deals.

Matthias Evers: In those situations, the demand for high-end innovation is unbroken, and we see that in the selective deals that are made at this point of time, despite the environment. Secondly, the difference between how people look at commodity, more commoditized services, versus solutions that are pointing more towards pipeline building. That's where we see Evotec's strong position and let me hand over on that note to Cord.

Amit at this point of time, despite the environment and secondly, the difference between how people look at commodity more commodity type services growth of solutions that are pointing more towards pipeline building. So that's where we see it with Textron acquisition, let me hand over to Claude.

Cord Dohrmann: Yeah, thank you very much, Matthias. I want to pick up where Matthias left off. Pipeline building type of deals usually have a more strategic character for the pharmaceutical industry. These type of deals take more time to generate and finalize and sign than more tactical fee-for-service deals, of course. They're also not as much affected, I would say, as the tactical fee-for-service outsourcing, as this is really strategic. It usually involves pipeline building. It's usually driven by a very high differentiation in terms of technology platforms and pipeline opportunities, pipeline projects that are loaded into these deals. Here, once again, at this point in time, we don't see any real slowdown. We do see continued interest, especially in our genomics-based or driven drug discovery efforts and platforms here that are servicing a wide variety of indication areas.

Yes, thank you very much.

So.

Yeah, I'm going to pick up where that left without I mean pipeline building high bulk deals are usually at a more strategic character for pharmaceutical industry.

These type of deals.

They take more time to generate and finalize them time.

And then more technical a fee for service deals of course.

But they also not as much.

I would say as the.

Tactical fee for service outsourcing.

As said this is really strategic.

Bulks pipeline building.

It.

Usually driven by a very high differentiation in terms of.

Technology platforms and pipeline opportunities.

The pipeline projects that are loaded into these deals.

So here once again at this point in time, we don't see.

Any real slowdown.

With the continued interest.

Especially.

Hmm Omics.

Based drug discovery efforts and platforms here that.

Third thing.

A wide variety of indication areas.

Cord Dohrmann: We also see a lot of traction and interest in our iPSC-based cell therapy focus area, where we have quite a number of discussions on projects that we have been working on for quite some time. Overall, we are still very optimistic that we will continue to sign deals that are of strategic nature. Here at this point in time, we don't see any real slowdown or change in the dynamics in the industry.

But we also see a lot of traction and interest in our Ips ebay.

All therapy focus area.

We have.

Quite a number of discussions on.

Project.

But we have been working on for quite some time.

Overall, we are still very optimistic that we will continue to.

To find a deal.

Our strategic nature and here at this point in time, we don't see any slowdown or change in the dynamics in the industry.

Werner Lanthaler: Thank you. Of course, you should consider that all these transactions typically are closed over timelines starting with three years and sometimes going up to seven years in their nature. That, of course, allows us much better visibility and planability of these partnerships than short-term tactical outsourcing. That's why these two things should really not be mixed up in the same bag. It's really two different efforts. Pipeline building, strategic long-term, beyond five years collaboration versus very tactical funding-driven crunches in pharma and in biotechs. Next question.

Thank you and of course yoga.

That all these transactions typically closed over timelines.

Starting with three years, and sometimes going up to seven years in their nature and that of course allows us much better visibility.

In plain ability of these partnerships than short term tactical outsourcing and that's why these two sinks should really not be mixed up in the same bag. It's really two different efforts pipeline building strategic long term beyond five years collaboration.

Versus very tactical funding driven crunches in pharma and biotechs.

Next question thought it I really appreciate all the color and then just a quick follow up I. It's good to hear that most of your businesses online after the cyber cyber attack, though I did notice that you noted that your API manufacturing would still kind of.

Joseph Wolf Chanoff: Got it. I really appreciate all the color. As just a quick follow-up, it's good to hear that most of your businesses are online after the cyber attack, though I did notice that you noted that your API manufacturing was still kind of suffering some of the after effects. I was wondering if you'd be so kind as to size that business for us just as a percentage of revenue. Is there any chance that you've lost wallet share here as customers have looked to move to their time-sensitive projects elsewhere? Given the specter and nature of these processes, are you pretty confident that you've maintained it?

Suffering some of the after effects. So I was wondering if you'd be so kind as to size that business for us just as a percentage of revenue and is there any chance that you've lost wallet share here as customers have looked to move to their time sensitive projects elsewhere or given the nature given the prospective nature of these processes are you pretty confident that you did.

No.

Werner Lanthaler: Before I hand over for numbers to Matthias, we are fully back on all our platforms, and it was really us who were not the bottlenecks here. We had to validate everything with external authorities, which we also are ticking off as we speak and have done as we speak. That's why we are absolutely open for business again and feel very good about it. When it comes to our total dimension of the business, Matthias gives you a color.

Yes.

So before I hand over for numbers to two materials, we are fully back on all of our platforms and it was really US who were not the bottlenecks here, we had to validate everything with external authorities, which we also are taking off as we speak and have done as we speak.

So that's why we are absolutely open for business again, and and feel very good about it.

And when it comes to our total dimension of the business Mathias gives you a call.

Matthias Evers: I just want to thank you for the question and to start, Werner, because I would also frame it more as a matter of revalidating and bringing online the GMP business, which is multifaceted, of course, API at the heart of it. When we look at our development businesses, where we are in the range of EUR 150 to 170 million, then when we talk about the GMP affected areas that still need some required work, maybe a third of it, a third to less of it. That would dimensionalize the impact. Again, I think we are bringing that online as we speak with some carefully rebuilding the momentum on the BD side, as articulated by Werner earlier.

Thank you for the question and to stock them up because I would also frame it more as a meta off.

Re validating and bringing online the G&P business, which says.

Multifaceted of course API at the heart of it so when we look at our development business is where we are in the range of $150 million to $270 million and we speak when we talk about the GMP affected areas that still need some required work, maybe a sort of X.

They are swapped through to less of it so that would dimensionalize the impact, but again I think we are bringing that online FTE speak with some.

After Kevin bidding.

Building the momentum on the BP side, so I have articulated by rental earlier and.

Werner Lanthaler: Also coming back to a question from James at the beginning. The INDiGO business is something which you will see in Q4, Q3, very strong. INDiGO is sort of leading into development manufacturing business. That's why we are for 2024 quite optimistic for that business in this dimension as Matthias pointed out, going up to about EUR 200 million total capacity that we have available in that business.

And also coming back to a question from James at the beginning.

The indigo business M is something which we which you will see in Q4 Q3, very strong and indigo is sort of seeing leading into development manufacturing business and that's why we are 424 quite optimistic for that business in this dimension as is.

Mathias pointed out going up to about 200 million total capacity that we have available in that business.

Yeah.

Joseph Wolf Chanoff: Got it. Thank you very much.

Got it thank you very much.

Werner Lanthaler: Thank you.

Operator 2: The next question comes from the line of Steven Ma with TD Cowen. Please go ahead.

The next question comes from the line of Steven Mah with T. D. Cohen. Please go ahead.

Steven Ma: Great. Thanks for taking the questions. I've got a three-part question on Just – Evotec Biologics. One, the EUR 1 billion sales book order, can you help us define exactly what that is? Does that include potential work that hasn't yet been committed? Two, how has that order book compared to your internal projections for Just – Evotec Biologics? Finally, has the macro environment impacted your plans for multiple J.PODs beyond Toulouse? Thank you.

Great. Thanks for taking the questions.

I've got a three part question on that Jesse Votech biologics so one.

The 1 billion Euro sales book order can you help us define exactly what that is does that include potential work that hasnt yet been committed.

And then too.

How has that order book compare to your internal projections for just biologics and then finally has the macro environment impacted your plans for multiple J pods beyond <unk>. Thank you.

Great questions I think let me start with the third question. The beauty of just you would take biologics is the.

Werner Lanthaler: Great questions. I think, let me start with the third question. The beauty of Just – Evotec Biologics is the highest productivity holding platform in the industry. That's why 2 metric tons of output of a J.POD gives us enormous output potential for a J.POD in the US and a J.POD in Europe. These were the two geographies that we wanted to create in order to nearshore biologics capacity. When it comes to giving you color on the order book and how this compares to our original assumptions, I hand back to Matthias.

Highest productivity.

Holding platform in the industry. So that's why two metric tons of output of the J part gives us enormous output.

Output potential.

For trade pods in the U S and a J put in Europe , and this where the two geographies that we wanted to.

Create in order to near shore Biologics.

Capacity.

And when it comes to giving you color on that.

The order book and and how this compares to our original assumptions I hand back to Martin Okay.

Matthias Evers: Okay. Thank you, Steven, for the question. What is the sales order book? We talk about closed sales, this is all committed work. Now, there's no guarantee because there are often milestones and decisions, but it's committed work, so it's not wishful thinking. That number, we are carefully tracking, and we had, of course, prior to the last Capital Markets Day and at the Capital Markets Day. We keep on tracking that for that committed work. You will remember that we were nearing $100 million in terms of at that point of time, and that's why, what I called earlier in the question from Peter, the arc of our evolution. We started in the space of establishing that platform in the biotech space, and we have announced, for instance, a partnership with Alpine, you might remember.

Thank you Steve.

For the question. So so what is the sales order book, So we talk about closed sales.

We're all committed work now.

Now there's no guarantee it because.

Of milestones and precision committed work so it is not wishful thinking.

And Thats that number we are carefully tracking and we had of course prior to the last capital markets day and at the capital markets day.

We will keep on tracking.

Committed work.

You will remember that we were nearing $100 million in terms of at that point of time, and that's why I mean, what I called earlier in the question.

From from Pizza is the arc of evolution, because we started in the space of establishing a platform in the biotech space and we have announced for instance, a partnership with alpine.

You might remember that was building up the sales funnel, reaching $100 million and we've talked about with Biosimilars as a strategic space, where we run a feasibility project.

Matthias Evers: That was building up the sales funnel, reaching $100 million, and we talked about the biosimilars as a strategic space where we run a feasibility project. By now, we are more nearing $1 billion, and that gives us some runway into J.POD 1 and 2. Outlook, I am not commenting. Question 3 is already answered. I think you should see it as a metric that is determining the committed work for the next 2, 3, 4 years. That is a metric we will also continue looking at as we build the business momentum.

Now we are more nearing.

And that gives us some runway into J part one and two.

Look I'm not commenting question three is already answer so I think you should see it as a metric that's determining the Zip code.

<unk> work for the next 234 years and that's a metric we will also continue looking at SBA.

The business momentum and again don't look at trustee protect biologics is more capacity in the space of antibodies or bio bi specifics or something that this is a paradigm shift.

Werner Lanthaler: Again, don't look at Just – Evotec Biologics as more capacity in the space of antibodies or bispecifics or something like that. This is a paradigm shift of how we, in the future, will manufacture biologics. That's why it's really a question what to compare that number to. For me, it's just amazing to see that a new technology within such a short period of time has attracted EUR 1 billion of committed capital. That's really fantastic. Not capital, it's sales. I hope that answers your question, and we are looking forward to the next question.

How we in the future will manufacture biologics so that's why.

It's really a question of what to compare that number too for me it's just.

Amazing to seeded a new technology.

In such a short period of time has attracted a billion of committed capital. So that's really fantastic not capital sales.

I hope it answers your question and we are looking forward to the next question.

Okay.

Operator 2: The next question comes from the line of Joseph Hedden with Rx Securities. Please go ahead.

The next question comes from the line of Joseph Hedden with Rx Securities. Please go ahead.

Joseph Hedden: Good afternoon. Thanks for taking my questions. Just on Just, it's clear Q2 was a great quarter with Sandoz a strong contributor. Just on the rest of the year, really, do we expect that to be the standout quarter of the year? Or do you see other strong contributions from Just? It's EBITDA positive for the H1. What might we expect when the full year is done?

Good afternoon.

My questions.

Just it's clear Q2 was a great quarter with Sandoz strongholds pizza.

Just just on the rest of the year ready do we expect that to be the standout quarter of the year.

Or do you see.

Do you see others strong contribution from just.

It's EBITDA positive for the first 12 mm.

What we expect when the full year.

Werner Lanthaler: Yeah.

Joseph Hedden: Secondly, just thinking about how you account for the revenues, the full-time employee rates, from your major collaborations, especially with BMS. We've always kind of traditionally thought of those as EVT Innovate collaborations. Does that mean that the bulk of those revenues are being booked under, as FTE revenues, under the EVT Innovate segment, or is it a little more complex than that? Thanks very much.

And then secondly, just thinking about how you count.

<unk> revenues.

Well you're right.

Strong youll major collaboration, especially with BMS.

So it always.

So those that innovate collaborations.

Does that mean.

The bulk of those revenues are being booked.

FTE revenues under the new <unk> segment.

A little more complex.

Thanks very much.

Werner Lanthaler: Unfortunately, we cannot deliver a tech partnership with an industry leader like Sandoz every quarter. Our exclusivity provisions would probably not allow that. Probably Q2 was definitely exceptional when it comes to the upfront and revenue impact. The momentum in getting the technology and the paradigm shift out in the industry, I think is just starting. That's why this is so important. You should not expect significantly more revenues for Just Evotec Biologics to come, because also here we first operationally have to build the capacity that we can deliver. Never forget, we are, so to say, building at the same time as we are rolling out this technology, and that has to come together.

So.

Unfortunately, we cannot deliver as tech partnership with an industry leader like Sundew every quarter.

Also our exclusivity provisions will probably not allow that so.

Probably.

Q2 was definitely exceptional when it comes to the upfront and revenue impact, but the momentum.

In getting the technology and the paradigm shift out in the industry. I think is just starting that's why this is so important but you would you should not expect significantly more revenues for adjusted EBITDAX biologics to come because also here we first operationally.

Has to build the capacity that we can deliver and never forget we are so to say building.

At the same time as we are rolling out this technology and that has to come together and this is ultimately coming together ones boost J Potts.

Werner Lanthaler: This is ultimately coming together once both J.PODs are fully operational, that we can also leverage capacity from one to the other one, and that will not happen before the end of 2024, beginning of 2025, and that's also why this vision of Action Plan 2025 and Just – Evotec Biologics has always been built. On the second question, you're absolutely right. You should expect high FTE rates and milestones and royalties when they come from neuro or from BMS Oncology, be revenue recognized in the EVT Innovate lines.

A fully operational that we can also leverage capacity from one to the other one and that will not happen before.

At the end of 'twenty for beginning of 'twenty five and that's also why this vision of excellent plan 2025, and just you protect biologic has always been built.

And on the second question, you're absolutely right you should expect I S. T E rates and milestones and royalties when they come from a neuro or from BMS encore be revenue recognized in the innovate lines.

Joseph Hedden: Okay. That's great. Thanks, Werner.

Okay, that's great.

Werner Lanthaler: Great. I hope that answers your question, and we look forward to the next question.

Great I hope that answers your question and we look forward to the next question.

Operator 2: The next question comes from the line of Charles Weston with RBC. Please go ahead.

The next question comes from the line of Charles Weston with RBC. Please go ahead.

Hi.

Charles Weston: Hi. Sorry for the delay there. I have three questions, please, if I can just ask them in turn. The first with regards to the competitive landscape, which you said is tougher in the more commoditized service. How is that actually impacting the market? Is there price cutting that you have to do to maintain your share, or are you happy to maintain your higher pricing and lose share? What might that mean in terms of your revenue mix by higher margin and lower margin business?

I have three questions. Please if I can just I'll spend a ton.

First with.

In regards to the competitive landscape.

You said it in the more Commoditized service and how is that actually impacting the market is that is that price cutting.

That you have to do to maintain your share or are you happy to maintain higher pricing and lose share.

And what might that mean in terms of your Rev.

Revenue mix by higher margin and lower margin business.

Werner Lanthaler: First question goes to Matthias.

First question goes to my T S.

Matthias Evers: Yeah. I hinted a little bit with changing tactics. I would say, it does not lead to, on our side, as a response to price cutting. I would rather emphasize value-based pricing, where we say, what is a fair price, responding to the value that we provide. That might include milestones, upfront risk-taking, that's for sure. It is a bit more competitive environment in the more commoditized services, and we are definitely looking at our full toolbox there, which is not to say we don't see the necessity, and it would also not be helpful in the market to move into price cutting.

I mean, I hinted a little bit with changing tactics, so I would say.

It does not lead to an outside of the reforms coupling I would rather emphasize value based pricing.

What is the payout prior.

Responding to the value that we provide so as that might include milestones upfront risk take care that's for sure. So I mean it.

It is a bit more competitive environment and the more commodity class services and we are definitely looking at our full toolbox.

Which is not to say I mean, we don't see the mess us up to you and it would also not be helpful. In the market to move into private company.

Charles Weston: That's very clear. Thank you. My second question, just with regard to your own ability to offset some of the pressures that you see, particularly on the funding slowness, are you able to slow down your hiring rate or do other cost-cutting measures in order to be able to protect the EBITDA progression that you're expecting?

That's very clear thank you.

Question, just with regard to your ability to offset some of the pressures that you see.

Secondly on the funding.

<unk>.

Are you able to slow down your hiring rates or do other cost coffee.

Yes.

It could be able to protect the EBITDA progression that you were expecting.

Werner Lanthaler: As Letitia has outlined to you, we have implemented what we internally call a value protection plan, where we have questioned, of course, every spending that we have taken. I would say again, never waste a crisis. That's why the cyber incident crisis was a good triggering point for us, not only to react and rebuild, but also to question everything that we are building at this stage. If you look to our website, you will see that we are currently looking for more than 250 open positions. Most of them dedicated to process development in Just Evotec Biologics, which also shows you that we here see by far the strongest operational demand of capacity that we are building. Otherwise, we are very happy that we have continued to build our workforce in a steady state over the years.

So as Lee teacher has outlined to you we have implemented what we internally call it value protection plan.

Yeah.

We have questions of course every spending that we have taken.

And I would say again never waste a crisis. So that's why the cyber incident crisis was a good.

Triggering point for us not only to react and rebuilt but also to question everything that we are building at this stage.

If you look to our website you will see that we are currently looking for more than 250 open positions.

Are most of them dedicated to process development and Trust depot took biologics, which also shows you that we see by far the strongest exploration of demand of capacity that we're building otherwise.

Otherwise we are very happy that we have continued to build our workforce in a steady state over the years, we have slowed down hiring in certain areas, but we also see.

Werner Lanthaler: We have slowed down hiring in certain areas, we also see that retention rates are going up. Therefore, we feel that the platform is growing with the best people at this stage. It's, I would say, at this stage, a good mix of strong hiring in Just – Evotec Biologics and very selective hiring in the other areas, but of course, a bit more cautious than we have been before.

That retention.

When rates are going up so therefore, we feel that the platform is growing with the best people at this stage and and it's.

I would say at this stage.

A good mix of strong hiring in just equal to biologics and very selective hiring in the other areas, but of course it bit more cautious than we have been before.

Charles Weston: Thank you, Werner. My last question relates to the bridge from 2023 to 2025. I guess we should be expecting that progression on the EBITDA to be more back-end weighted, but can you give us a sense of how much back-end weighted it's likely to be? You've given us, 2023 and 2025 expectations. It would be just helpful to get just a broad sense perhaps of how we should expect that to trend over the two years.

Thank you then my last question relates to the bridge from 2023 2025.

Should we I guess it should be expecting that progression of EBITDA, let's be more backend weighted so can you give us a sense of how much backend weighted it's likely to be a gain of $23 35.

Its expectations.

It would be just helpful to get that.

Uh huh.

How we should expect.

To trend over the two years.

Werner Lanthaler: Again, you see a company that every year over the last 14 years, by the way, has been growing by double-digit on its base business revenues. That's a clear trend that you can factor in, and there is for 2024, I would say double-digit revenue growth in our base business, something that we, from a capacity perspective, are able to show and also what we, in our budget processes, will have in the quote-unquote, very close to the 10% and not much higher than that, double-digit rate of a base business. There are two factors that you have to see that are, yes, back-end loaded for 2025, because one is how many milestones will EBITDA contributing fall in place. That's why I've shown you today this massive pool of existing pipeline events that are coming with high milestones behind them.

So again.

You see a company that every year.

Over the last.

14 years by the way has been growing by double digits on its base business revenues. So that's a clear trend that you can factor in and there is 424, I would say double digit revenue growth in our base business something that we from a capacity perspective.

Able to show and also what we in our budget processes will have in the quote unquote very close to the 10% and not higher than much higher than that.

Great.

<unk> business and then there are two factors that you have to ceded or yes back end loaded for 25, because one is how many milestones will EBITDA contributing.

Fall in place.

That's why I've shown you today this massive pool of existing <unk>.

Pipeline events that are coming with height milestones behind them. So the message here is we don't have to close the new deals with the high double digit million events behind the medicine. They are there and in the year 25, if you look at them compared to 23, you see them.

Werner Lanthaler: The message here is we don't have to close the new deals with the high double-digit million events behind the milestones. They are there. In the year 2025, if you look at them compared to 2023, you see them three times as high from their potential. Of course, they have to be proven by biology. That's an existing potential that has to come in place in 2025, and it's building up over 2024, but at a slower pace than what you will see in 2025, given the nature of the contracts that we have signed. The third element is the EBITDA contribution coming from Sandoz plus other, plus Evotec Biologics elements, where first, both J.PODs have to be fully operational, which will also only be possible into second end of 2025.

Three.

Three times as high from that potential but of course, they have to be proven by balance sheet. That's in an existing potential that has to come in place in 2005, and it's building up over 24, but at a slower pace than what you will see in 'twenty five given the nature of the contracts that we have signed.

And the third element is the EBITDA contribution coming from some from Sandal plus other trust you will pick biologics.

Elements, where first both trade parts have to be fully operational.

Which will also only be possible into 'twenty fives second end of 'twenty five.

Werner Lanthaler: Where we have to deliver against our existing contracts, which again, is also a bit driven by biology and delivering on projects. Also here we are quite confident. It's these three elements coming together to make the bridge from today to go above EUR 1 billion in sales and to go to EUR 300 million in EBITDA. What we don't want to do, we don't want to slow down our R&D efforts to get there, because there is all reason to believe that PanOmics-driven drug discovery and iPSC cell-based drug discovery will really open many doors just as well as Just – Evotec Biologics does this at this stage.

And we are.

We have to deliver against our existing contracts, which again is also a bit driven by by biology and delivering on on projects. But also here. We are quite confident so it's these three elements coming together to make the bridge from today to go above a billion in sales.

And to go to 300 million in EBITDA, because what we don't want to do we don't want to slow down our R&D efforts to get there because there is all reasons to believe that panamax driven drug discovery and IPC. So.

Faced struck discovery will really open many many doors just as well as just people take bellatrix justice at this stage.

Charles Weston: Thank you for the color.

Hello.

Werner Lanthaler: Pleasure. Next question, please.

Yes sure.

Next question. Please the next question comes from the line of a backlash tsao with H C. Wainwright. Please go ahead.

Operator 2: The next question comes from the line of Douglas Tsao with H.C. Wainwright. Please go ahead.

Hi, good morning.

Douglas Tsao: Hi, good morning. Congrats on the progress. In terms of the iPSC and the PanOmics business, Werner, I'm just curious, how scalable do you see those businesses, and how much of a limitation is it finding the high-quality people that to date you've been very successful in bringing into the business?

That's on the progress.

Yeah.

In terms of the I guess, the independent all Mexico.

Right now I'm, just curious how scalable do you see those businesses and how much of a limitation is it finding the high quality people that today you can vary you you've been very successful.

Uh huh.

Werner Lanthaler: On scaling of PanOmics and iPSCs, I'd like to hand over to Cord.

So on scaling of panel makes an Ips CS.

I'd like to handover to court.

Yeah.

Cord Dohrmann: Yeah. That's a really good question. We are very certain that both platforms are actually highly scalable. The PanOmics platform, PanOmics-driven drug discovery, it's really a paradigm-shifting effort in the industry, using PanOmics as a guiding light essentially throughout the drug discovery process. From the very beginning, understanding the disease on a molecular level by profiling patient samples, tissue samples of diseased tissues, to translating this into disease signatures, which can be used for drug screening purposes. Ultimately then moving them forward into the clinic based on PanOmics-based biomarker strategies and patient stratification, then also based on these PanOmics-based biomarkers in the clinic. We see this as a new end-to-end platform which can be applied to most disease areas. Where we are currently using it the most is probably in the context of neural and oncology.

Really good question.

But we are very certain that.

Both platforms.

<unk> highly scalable.

The Panamax platform, Panama stripping drug discovery it is really a.

A paradigm shifting effort in the industry are using panel makes as a guiding light essentially throughout the drug discovery process from the very beginning understanding the disease on a molecular level by profiling patients samples tissue samples of disease.

Tissues.

Translating this into disease take metrics, which can be used to attract screening purposes.

And ultimately then moving them forward into the clinic based on Panamax space.

Biomarker strategies and patient stratification, and then also based on.

These panamax based biomarkers in the clinic, so we see this.

A new end to end platform, which can be applied.

<unk> disease areas.

Where we are.

Currently.

Using it the most it's probably in the context of.

Neuro and oncology, but.

Cord Dohrmann: I&I, cardiovascular, pain, essentially any other area is just as well suited. We believe that this will come. Similarly for iPSC-based cell therapy, there's just a large number of opportunities ahead of ourselves beyond diabetes, which is currently our leading project, most advanced one, where we are hopeful to introduce this into the clinic end of Q3 2024. We are active in the oncology space here in particular. There are also many other opportunities, which are currently too early to talk about. It's an absolutely scalable exercise because much of the platform or I would say actually, probably around 75% to 80% of the platform remains the same. Where you can use essentially existing platforms, proven platforms, in other areas, and which means that you can move and scale even faster in other areas.

And I cardiovascular.

Pain.

Essentially any other area, it's just as Rob said it.

And we believe that this will come similar.

Similarly for <unk> based cell therapy.

<unk>.

Theres just a large number.

<unk> opportunities ahead of ourselves beyond die.

Diabetes, which is currently our leading project most advanced one where we are hopeful introduces into the clinic and.

2020 for the year.

It's so they are we are.

Active in the oncology space here in particular, but.

There are also many many other opportunities.

Which are currently purely to talk about but it's a it's an absolutely scalable exercise because.

Much of the platform more I would say actually.

Probably around 75 to 80.

80% of the platform remains the same and where you can use essentially existing platforms proven platforms.

In other areas and which means that you can move and scale even faster in other areas.

Douglas Tsao: Thank you so much.

Okay.

Cord Dohrmann: I hope that answers that question.

And with that question.

Werner Lanthaler: Thank you, Cord. I think the answer to your question is a clear yes, this is scalable also effectively through the fact that this is algorithm and platform-driven. With this also being conscious of all of your time, let me thank you very much for following us in a quite exciting H1 2023. I think it's a fair wish that we want to have only business excitement in the H2 2023, and we are very thankful for you to follow us, and we look forward to seeing you very soon. If there are any further questions, please don't hesitate to reach out to Volker or to any one of our team. We are happy to answer all questions. All the best.

Thank you.

So I think the answer to your question is a clear yes. This is scalable also effectively through the fact that this is the algorithm and platform driven.

And with this also being conscious of all of your time.

Let me. Thank you very much for following us in a quite exciting first half of 'twenty three I think it's a fair wished that we want to have owned the business excitement in the second half of 2023, and we are very thankful for you to follow us.

And we look forward to seeing you very soon if there are any further questions. Please don't hesitate to reach out to folks or to any one of our team. We are happy to answer all questions all the best.

Okay.

Operator 2: Ladies and gentlemen, the conference is now over, and you may disconnect your telephone. Thank you for joining, and have a pleasant day. Goodbye.

Ladies and gentlemen, the conference is now over and you may disconnect. Your telephone. Thank you for joining and have a pleasant day goodbye.

Okay.

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